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Question of the Day
“The current state of world affairs and the political climate it has created make it doubtful that Americans are willing to accept that the solutions to our future domestic problems are dependent on the skills, talents and productivity of foreigners.”
Mr. Bernanke noted recently that immigrants on average are younger than native Americans, are more inclined to work and have more children per family, providing an important prop to the economy by counteracting the slower growth and heavy pension burdens caused by an aging native work force.
The Fed chairman has urged Congress to ensure a steady and reliable flow of immigrant workers that the economy needs. But he estimated that immigration will have to increase to about 3.5 million a year from 1 million today to overcome all the problems caused by aging — an unlikely prospect.
“Immigrants who come and contribute to the economy and who are younger will be of some assistance in offsetting this demographic transition,” he said, “but they’re only going to be part of the story and we’re going to have to address these broader issues in any case.”
In the absence of a major new wave of immigrants, fewer U.S. workers will be called upon to support a growing number of retirees and will have to be even more productive than previous generations to keep the economy humming anywhere close to its average 3 percent growth rate in modern times, Mr. Stinson said.
“Productivity will need to increase. … Everyone’s talents must be fully used if we are to continue to be successful,” he said. “If it doesn’t, we will not maintain our current living standard.”
Productivity is key
Productivity — or a worker’s output per hour — has been growing strongly in the last decade thanks to technological improvements like the computer, Internet and digital applications that enable workers to do more work with the same amount of effort they made in past years, for example, using typewriters.
Maintaining strong productivity requires robust investment by businesses in new technologies as well as large flows of capital to finance the investments. Some economists question whether enough investment funds will be available as the senior population spends down its savings — a key source of capital. But others are confident that the U.S. will continue to benefit from the strong flows of investment from abroad that the country has enjoyed in recent years.
Mr. Stinson is more concerned about possible shortages of the highly educated and skilled workers needed to create and man the technologies of the future. Employers already are reporting shortages of skilled workers in areas dominated by baby boom workers today, like nuclear, aerospace and petroleum engineering.
Workers in the future will need at least college educations to land the best jobs and fuel technological advances, but high school dropout rates today are elevated at nearly 10 percent and rising. Dropout rates among minorities and migrants, which are projected to make up a greater share of the work force, are substantially higher than those of the shrinking white population.
“We have a serious problem. We’re falling behind in our ability to develop human capital” through education, said Arthur Rolnick, senior vice president of the Federal Reserve Bank of Minneapolis. He noted that workers with college educations earn 100 percent more on average than high-school dropouts, and the pay-off to education has been growing rapidly, but that has not sufficed to keep all youths in school.
“If we have kids that drop out of high school, that’s a major crisis in our economy,” he said.
To deter potential dropouts, he and Mr. Bernanke said educators must get started before children even enter school to help them develop the right attitudes and aptitudes.
“We’re way underinvesting in early childhood education,” Mr. Rolnick said, noting that the federal “Head Start” program, which provides assistance to poor pre-schoolers has been a notable success. “There is a very high return to a public program like that.”
By Andrew P. Napolitano
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